Question 1

If the CPI was 170 in 1998 and was 187 in 1999, what was the inflation rate in 1999?

Accepted Answer

The inflat...

Question 2

Suppose the typical basket for the calculation of the CPI includes one computer. Since computers have gotten better over time as a result of technological change, what problem does this create for calculating the CPI?

Accepted Answer

The improvement in t...

Question 3

When new goods are introduced, consumers have more variety from which to choose. As a result, each dollar is worth

Accepted Answer

A)   more, and the cost of living increases.
B)   more, and the cost of living decreases.
C)   less, and the cost of living increases.
D)   less, and the cost of living decreases.E) A) and B)
F) A) and C)

Question 4

If the cost of food & beverages increases by 10 percent, then, other things the same, the CPI is likely to increase by about

Accepted Answer

A)   1.5 percent.
B)   7.5 percent.
C)   10 percent.
D)   20 percent.E) A) and B)
F) A) and C)

Question 5

Scenario 24-4
Quinn has job offers in Wrexington and across the country in Charlieville. The Wrexington job would pay a salary of $50,000 per year, and the Charlieville job would pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the CPI in Charlieville is 90.
-Refer to Scenario 24-4. If Quinn only cares about maximizing her purchasing power, then she should

Accepted Answer

A)   take the Charlieville job.
B)   take the Wrexington job.
C)   take either job because they both have the same purchasing power.
D)   The answer cannot be determined from the information given because a salary is not the same as purchasing power.E) All of the above
F) None of the above

Question 6

Suppose the price of a six-pack of cola rises from $3 to $3.75 and the price of a pack of mints rises from $1.25 to $1.75. If the CPI rises from 140 to 182, then people likely will buy

Accepted Answer

A)   more cola and more mints.
B)   more cola and fewer mints.
C)   less cola and more mints.
D)   less cola and fewer mints.E) All of the above
F) A) and B)

Question 7

For the purpose of calculating the consumer price index, the basket of goods

Accepted Answer

A)   is kept the same from year to year so that the effects of price changes are isolated from the effect of any quantity changes that might be occurring at the same time.
B)   is kept the same from year to year; otherwise, the value of the index would remain constant from year to year.
C)   varies from year to year; otherwise, the value of the index would remain constant from year to year.
D)   varies from year to year so that consumers' buying patterns are updated in a timely fashion.E) A) and B)
F) A) and C)

Question 8

Which of the following statements is true?

Accepted Answer

A)   Even if we know the values of the consumer price index for the years 2009 and 2010, we cannot calculate the inflation rate for 2010 if we do not know which year is the base year.
B)   If we know the base year is 1990, and if we know the value of the consumer price index for the year 2010, then we have all the information we need to calculate the inflation rate for 2010.
C)   If we know the base year is 2000, and if we know the value of the consumer price index for the year 1995, then we have all the information we need to calculate the inflation rate for 1995.
D)   If we know the base year is 2000, and if we know the value of the consumer price index for the year 1995, then we have all the information we need to calculate the percentage change in the cost of living between 1995 and 2000.E) B) and C)
F) None of the above

Question 9

Table 24-6
The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs.
 
-Refer to Table 24-6. If the base year is 2011, then the economy's inflation rate in 2011 was

Accepted Answer

A)   -5.0 percent.
B)   -3.3 percent.
C)   3.3 percent.
D)   16.0 percent.E) A) and C)
F) None of the above

Question 10

Consider a small economy in which consumers buy only two goods: pretzels and cookies. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that

Accepted Answer

A)   the percentage change in the price of pretzels is equal to the percentage change in the price of cookies from year to year.
B)   the number of pretzels bought by the typical consumer is equal to the number of cookies bought by the typical consumer in each year.
C)   neither the number of pretzels nor the number of cookies bought by the typical consumer changes from year to year.
D)   neither the price of pretzels nor the price of cookies changes from year to year.E) B) and C)
F) A) and D)

Question 11

If the price of Spanish olives imported into the United States decreases, then

Accepted Answer

A)   both the GDP deflator and the consumer price index will decrease.
B)   neither the GDP deflator nor the consumer price index will decrease.
C)   the GDP deflator will decrease, but the consumer price index will not decrease.
D)   the consumer price index will decrease, but the GDP deflator will not decrease.E) A) and B)
F) A) and C)

Question 12

For an imaginary economy, the consumer price index was 80 in 2014, 100 in 2015, and 140 in 2016. Which of the following statements is correct?

Accepted Answer

A)   If the basket of goods that is used to calculate the CPI cost $40 in 2014, then that basket of goods cost $60 in 2015.
B)   If the basket of goods that is used to calculate the CPI cost $25 in 2015, then that basket of goods cost $35 in 2016.
C)   The overall level of prices increased by 60 percent between 2014 and 2016.
D)   All of the above are correct.E) A) and D)
F) B) and C)

Question 13

Table 24-8
The table below relates to the economy of Mainland, where the typical consumer's market basket consists of 2 televisions and 300 hamburgers.
 
-Refer to Table 24-8. The cost of the basket

Accepted Answer

A)   increased from 2013 to 2014 and increased from 2014 to 2015.
B)   increased from 2013 to 2014 and decreased from 2014 to 2015.
C)   decreased from 2013 to 2014 and increased from 2014 to 2015.
D)   decreased from 2013 to 2014 and decreased from 2014 to 2015.E) A) and B)
F) B) and D)

Question 14

During a certain year, the nominal interest rate was 7 percent, the real interest rate was 4 percent, and the CPI was 198.3 at the end of the year. The CPI at the beginning of the year was

Accepted Answer

A)   204.2
B)   192.5
C)   178.6
D)   220.1E) None of the above
F) A) and B)

Question 15

If the price of Italian shoes imported into the United States increases, then

Accepted Answer

A)   both the GDP deflator and the consumer price index will increase.
B)   neither the GDP deflator nor the consumer price index will increase.
C)   the GDP deflator will increase, but the consumer price index will not increase.
D)   the consumer price index will increase, but the GDP deflator will not increase.E) None of the above
F) B) and C)

Question 16

Suppose that in 2010, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that

Accepted Answer

A)   GDP will increase in 2011.
B)   the producer price index will increase by more than 1.5 percent in 2011.
C)   interest rates will decrease in the future.
D)   the consumer price index will increase in the future.E) All of the above
F) B) and D)

Question 17

Table 24-6
The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs.
 
-Refer to Table 24-6. If the base year is 2009, then the consumer price index was

Accepted Answer

A)   100 in 2009, 115 in 2010, and 116 in 2011.
B)   100 in 2009, 115 in 2010, and 135 in 2011.
C)   100 in 2009, 120 in 2010, and 116 in 2011.
D)   120 in 2009, 125 in 2010, and 135 in 2011.E) All of the above
F) None of the above

Question 18

Table 24-9
The table below lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period.
 
-Refer to Table 24-9. What is the consumer price index for May?

Accepted Answer

A)   60
B)   132
C)   166
D)   123E) None of the above
F) B) and C)

Question 19

The real interest rate is the interest rate corrected for inflation.

Accepted Answer

A) True 
 B)False

Question 20

When the price of nuclear missiles rises, this change is reflected in the CPI but not in the GDP deflator.

Accepted Answer

A) True 
 B)False

Exam 11: Measuring the Cost of Living

Suppose the price of a six-pack of cola rises from $3 to $3.75 and the price of a pack of mints rises from $1.25 to $1.75. If the CPI rises from 140 to 182, then people likely will buy

Correct Answer
verified

When new goods are introduced, consumers have more variety from which to choose. As a result, each dollar is worth

Correct Answer
verified

Suppose that in 2010, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that

Correct Answer
verified

Table 24-8 The table below relates to the economy of Mainland, where the typical consumer's market basket consists of 2 televisions and 300 hamburgers. -Refer to Table 24-8. The cost of the basket

Correct Answer
verified

Suppose the typical basket for the calculation of the CPI includes one computer. Since computers have gotten better over time as a result of technological change, what problem does this create for calculating the CPI?

Correct Answer
verified
The improvement in t...
View Answer

If the cost of food & beverages increases by 10 percent, then, other things the same, the CPI is likely to increase by about

Correct Answer
verified

For an imaginary economy, the consumer price index was 80 in 2014, 100 in 2015, and 140 in 2016. Which of the following statements is correct?

Correct Answer
verified

Correct Answer
verified

The real interest rate is the interest rate corrected for inflation.

Correct Answer
verified

During a certain year, the nominal interest rate was 7 percent, the real interest rate was 4 percent, and the CPI was 198.3 at the end of the year. The CPI at the beginning of the year was

Correct Answer
verified

Table 24-9 The table below lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period. -Refer to Table 24-9. What is the consumer price index for May?

Correct Answer
verified

Consider a small economy in which consumers buy only two goods: pretzels and cookies. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that

Correct Answer
verified

If the price of Italian shoes imported into the United States increases, then

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

If the CPI was 170 in 1998 and was 187 in 1999, what was the inflation rate in 1999?

Correct Answer
verified
The inflat...
View Answer

If the price of Spanish olives imported into the United States decreases, then

Correct Answer
verified

For the purpose of calculating the consumer price index, the basket of goods

Correct Answer
verified

When the price of nuclear missiles rises, this change is reflected in the CPI but not in the GDP deflator.

Correct Answer
verified

Table 24-6 The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. -Refer to Table 24-6. If the base year is 2009, then the consumer price index was

Correct Answer
verified

Table 24-6 The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. -Refer to Table 24-6. If the base year is 2011, then the economy's inflation rate in 2011 was

Correct Answer
verified

Exam 11: Measuring the Cost of Living

Suppose the price of a six-pack of cola rises from $3 to $3.75 and the price of a pack of mints rises from $1.25 to $1.75. If the CPI rises from 140 to 182, then people likely will buy

Correct AnswerverifiedShow Answer

When new goods are introduced, consumers have more variety from which to choose. As a result, each dollar is worth

Correct AnswerverifiedShow Answer

Suppose that in 2010, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that

Correct AnswerverifiedShow Answer

Table 24-8 The table below relates to the economy of Mainland, where the typical consumer's market basket consists of 2 televisions and 300 hamburgers. -Refer to Table 24-8. The cost of the basket

Correct AnswerverifiedShow Answer

Suppose the typical basket for the calculation of the CPI includes one computer. Since computers have gotten better over time as a result of technological change, what problem does this create for calculating the CPI?

Correct AnswerverifiedThe improvement in t...View AnswerShow Answer

If the cost of food & beverages increases by 10 percent, then, other things the same, the CPI is likely to increase by about

Correct AnswerverifiedShow Answer

For an imaginary economy, the consumer price index was 80 in 2014, 100 in 2015, and 140 in 2016. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The real interest rate is the interest rate corrected for inflation.

Correct AnswerverifiedShow Answer

During a certain year, the nominal interest rate was 7 percent, the real interest rate was 4 percent, and the CPI was 198.3 at the end of the year. The CPI at the beginning of the year was

Correct AnswerverifiedShow Answer

Table 24-9 The table below lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period. -Refer to Table 24-9. What is the consumer price index for May?

Correct AnswerverifiedShow Answer

Consider a small economy in which consumers buy only two goods: pretzels and cookies. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that

Correct AnswerverifiedShow Answer

If the price of Italian shoes imported into the United States increases, then

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

If the CPI was 170 in 1998 and was 187 in 1999, what was the inflation rate in 1999?

Correct AnswerverifiedThe inflat...View AnswerShow Answer

If the price of Spanish olives imported into the United States decreases, then

Correct AnswerverifiedShow Answer

For the purpose of calculating the consumer price index, the basket of goods

Correct AnswerverifiedShow Answer

When the price of nuclear missiles rises, this change is reflected in the CPI but not in the GDP deflator.

Correct AnswerverifiedShow Answer

Table 24-6 The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. -Refer to Table 24-6. If the base year is 2009, then the consumer price index was

Correct AnswerverifiedShow Answer

Table 24-6 The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. -Refer to Table 24-6. If the base year is 2011, then the economy's inflation rate in 2011 was

Correct AnswerverifiedShow Answer

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The improvement in t...
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The inflat...
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